Tag Archives: biglaw

Big News For BigLaw Partner Billing, Bad News For Boutique Firm Prices

Just as conservatives gather news from Fox and liberals from NPR, so should large law firms and small ones read trend reports from separate sources. At least it seems, in recession reporting, good news for biglaw often means bad news for boutique firms.

Take, for example, this morning’s revelation from data collected by Valeo and summarized in the Wall Street Journal (see the WSJ article here).

Partners in the top 25 percent of hourly billers increased their average price to $873 per hour last year, up 4.9 percent from 2010, according to a report published Monday (via WSJ).

But, simultaneously, the lowest-billing partners barely kept pace with inflation, according to the same data. Partners in the bottom 25 percent billed an average of $204 per hour last year, up a mere 1.3 percent.

Attorneys are itching to ask, who dares to bill $1,000 per hour in a recession?

The answer: Ira Dizengoff, a financial restructuring partner at Akin Gump Strauss Hauer & Feld LLP, and Andrew Goldman, vice chairman of the bankruptcy practice at Wilmer Cutler Pickering Hale and Dorr LLP, both bill at $1,000 per hour or over, according to the WSJ.

Of course, those mega-billing Partners possess a specialty practice, working in areas such as high-end bankruptcy, tax, or costly corporate litigation, explains Valeo Partners, a consulting firm that maintains a database of legal rates pulled from court filings and other public information, to the WSJ.

Not only does type or niche of legal work make a difference in negotiating power for the firm, but volume comes into play with these percentages as well.

“That said, higher rates don’t necessarily mean higher profits, which also depend on the volume of work. Firms also don’t always collect the full amount that they bill. And some firms are simply making up for ground lost when they kept rates flat in 2009 or 2010,” tactfully wrote Jennifer Smith for the WSJ article.

Higher billing rates translates to higher revenue when the number of cases and clients is equally substantial.

Unfortunately, one overarching reality is that small firms are less successful in raising hourly billing rates. Although every firm in the industry is attempting to regain lost ground, smaller firms have less leverage with clients in routine matters, like bulk contract work or compiling documents for patent claims.

“I’m really seeing pretty much everybody across the board, big and small, trying to raise their rates. The small ones are not as successful,” Lewis Steverson, general counsel for Motorola Solutions Inc.,” said to the WSJ.

Nevertheless, average hourly billing rates are up 7.1 percent for partners at the top 12 firms, according to Valeo data as cited by the WSJ. On a positive note, this number is creeping gradually closer to the average 8 percent annual increase in billing rates that law firms experienced pre-recession.

So, let’s hope this is still good news for the entire industry, even if change is occuring top down.

-WB

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From Out Of A Job To In-House: How Corporate Counsel Trends Are Challenging Big Law Practice

Once again, recent reports on industry trends translates into good and bad news for lawyers.

According to the Association of Corporate Counsel 2011 Census Report–as described in this press release–the past five years have increase in-house legal spending and decreased external spending on litigation.

Translation? A power shift from large law firms to in-house counsel departments is on the rise.

And the current economic recession has caused, or at least exacerbated this trend.

“From demands for discounts, using online auctions to select firms, hiring law grads straight out of school, or simply moving more legal work in house, general counsel are pushing back on their outside lawyers,” reports the WSJ Law Blog.

However, the recession hasn’t depressed in-house counsel salaries.

In fact, notwithstanding hard economic times, compensation by in-house counsel has increased.

Of those surveyed, 22 percent of in-house counsel are earning more than $300,000 per year in salary, bonus, and other compensation, which is a rise of 16 percent from 2006, and 57 percent from 2004 (via WSJ Law Blog).

In-house counsel are seeing increased business and higher salaries, so much so that 37% plan to hire more help. According to the same report, 37% of in-house counsel allegedly planned to hire more staff in 2011. Good news for out-of-work assistants, paralegals, and even some staff associates.

Unfortunately, however, law firms will be forced to adjust to this decline in demand for outside counsel services.

The census discovered the use of outside counsel for tax issues has decreased (20% use them, vs. 30% in 2006). The same holds true for mergers and acquisitions (28%, vs. 35% in 2006) and, most surprisingly, for litigation.

So, if you’re planning a career shift (or have already taken advantage of the recent trend) toward in-house, below you’ll find a few tips for success.

If you’ve changed from a large law firm to corporate counsel, ViXS Systems Inc. general counsel Cheryl Foy emphasizes the importance of learning about the culture of the company you’re working for, including a comprehensive understanding of the needs and challenges of its business.

“Figure out who you’re working with. It’s folly to go in with the idea that ‘I’m the lawyer’—people will argue with your legal opinion. You have to build credibility so assess the culture first,” says Foy (via Canadian Lawyer Magazine).

In addition, don’t let a power shift in industry dynamics translate to a shift in power at your new position.

When Foy found herself in a situation in a previous in-house job where she wanted to be part of the executive team but wasn’t regarded as such, she received this advice: “You need to be acting like you’re at the table already,” (via Canadian Lawyer Magazine).

Make it clear on hire that a position as in-house counsel is one of management and decision-making. Act like a leader from the outset and you’ll be considered one in-house.

Finally, to fully understand the ins and outs of in-house counsel, remember there’s a big difference between big law practice and a position as in-house corporate counsel.

“Adapt a communication style that reflects that your audience has changed,” advises David Allgood, executive vice president and general counsel with the Royal Bank of Canada (via Canadian Lawyer Magazine).

“Remember it’s the enterprise who is your client now.”

And, with a new 40-60 hour workweek (instead of 60-80), who can complain about that?

-WB

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Are Women In Biglaw Marginalized? Why The Hiring Of Women at Big Firms Is Down

Copyright Inside Counsel

In October this year, the National Survey on Retention and Promotion of Women in Law Firms announced that for the first time in five years, the hiring of women at big law firms was down.

The amount of women equity partners—15 percent—has effectively remained stagnant over two decades. And, those female equity partners earn only 86 percent of the compensation of their male peers, according to the same survey.

Not only are these statistics bad news for women in biglaw, but the survey also implied that women and law firm managers are not at all on the same page in terms of career path.

For example, women lawyers are less likely to hold positions on the partner track. For example women represent 55 percent of staff attorneys—not a partner track position—which is the highest percentage of women lawyers in any law firm position.

Furthermore, women lawyers comprise 34 percent of counsel track positions in firms. And, although in many firms lawyers in the counsel position reported that the position is the stepping stone between associate and promotion to partner, very few firms indicated that their counsel are eligible to become partners.

Finally, to add insult to injury, the survey demonstrates that women partners are less likely than men to receive credit for even a relatively modest $500,000 book of business (via Philadelphia Business Journal).

Affirmative action and women’s suffrage are revolutions of the past. So, what is keeping female attorneys from succeeding in biglaw?

Biglaw as an institution—as opposed to various industry players—may be the one to blame.

Ms. JD theorizes that biglaw has been operating under the same, outdated structure for years. She hints that three reasons prevent women from advancing within biglaw:

“(1) The big firm structure was created and developed during a time where men worked in the office and women worked at home.

(2) The billable hour structure was created and developed during a time when men worked and had a woman at home taking care of the house, children, dinner, and the community.

(3) This was not a structure that predicted both men and women being in the work force and raising a family.”

Ms. JD’s thesis?

“The big firm structure will greatly benefit, as will the rest of the legal field and society, if both spouses can succeed at the office as well as at home.  Women—as well as men—want to see their families, have time to help their community, and do great work at the office,” concludes Sarah Villanueva on renovating the big firm model for Mr. and Ms. JD.

Now, what can your firm do to advance this thesis?

The next time your firm approaches the idea of a home-work balance, consider both spouses. Don’t assume the women has more responsibility. Instill a culture that rewards a healthy home life for male and female attorneys.

Track the success of your equity partners—both male and female—to determine whether or not women are being overlooked for their business-world victories. Ensure that rewards for cases won or clients attracted are equal across genders.

Finally, ask all your associates where they envision their career going in ten years. If your counsel track attorneys want partnership, make sure this is a viable option.

Cultivate a firm culture of honesty and open communication. Challenge outdated incentive structures, career paths, and compensation. It can all start with a simple conversation with each of your associates about what they want most from a position at your firm.

Find out how your company can develop, and implement a flexibility program that not only helps your employees manage their work and personal responsibilities effectively, but boosts productivity and your company’s performance with C4CM’s Worklife Flexibility CD Box Set.

-WB

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How Banks Changed, Après Credit Crunch, Towards Law Firm Clients

The American Lawyer compiled a report in early 2009 that showed how banks were viewing–and dealing with–law firms, mid-recession.  The lessons inherent in this scenario might prove beneficial now that the economic tide has turned.  Even ’though law firms have once again begun to pay off their short-term debts faster than was done a few years ago, it’s helpful to see how banks changed in their treatment of law firm clients during those lean years.

Understandably, a couple of years ago, lending institutions were anticipating devastating news.  Sure enough, says the piece in Law.com, “Early in 2008, banks say, firms raced to secure either new or bigger credit facilities and bit into them as business slowed.”

In January 2008, for instance, the now-defunct Howrey firm needed a loan.  Like most Biglaw firms, it required extra capital during the early part of the billing year when collections were low. In order to pay associates, other staffers and overall expenses, it relied on its short-term credit line(s) until clients pay their bills.

Howrey got whiff of the coming slump, so it asked Citigroup Inc. for a “beefed up” credit facility. Citi agreed. The rates were locked in for two years (as opposed to the more common term of one year).   Citigroup (which ultimately had some troubles of its own), having sensed the downturn as well, agreed to give Howrey a 25 percent larger credit facility with one catch: the firm needed to be more forthcoming with financial information.

Back then, Howrey agreed to report to Citi once a month—not just quarterly—for the next two years. Additionally, when partners came and went, that information, too, was wanted on a monthly basis—and not annually, as had previously been provided Citi by Howrey.

Bankers also came calling a bit more often, “especially,” says Law.com, “to scope out the firm’s exposure to the fall’s bank failures and mergers.”


In addition to the financial forecasts which bankers must have had on their minds, they had to also have been thinking about the then-recent break-up of another firm, that of Heller Ehrman and Thelen.  According to Law.com, the firm “dissolved not just because partners fled, but because of heavy debt commitments….”  Per the dissolution papers, Heller was $54 million in debt.

At the time, Citi was trying to prevent other bust-ups.  The lawyer in charge of law firm dissolutions made it clear that he was working on a few loan restructurings.

As things got increasingly dour, one firm, having let is credit line expire, depended on capital contributions from its partners.

And whereas banks used to give credit for free, firms found that they now had to pay for their credit lines.   Additionally, rates doubled—from below 1% in 2007 to 3% in 2009.  Andrew Johnman, head of professional services at Barclays plc, said, then, of the top 50 firms: “If they need additional money or if they need an amendment to their credit facility, then we reprice it to current market pricing.”  Finally, the banks wanted deposits. The banks called this latest demand a “more complete” banking relationship.

On a positive note, one message that came through loud and clear was just how far banks would go to work with their law firm clients.  Citigroup—which later needed bailing out—was right there, throughout…and ready to negotiate.  For more, go to:

http://www.law.com/jsp/article.jsp?id=1202427211781&slreturn=1&hbxlogin=1

-EM

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The Color Issue Is Also a Gender Issue – Minority Women In Big Law — Also, Jury Reaches Hedge Fund Verdict

When race has been discussed in the industry in previous years, gender hasn’t been part of the dialogue, says Kathy-Ann Hart of New York’s Verna Myers Consulting Group, L.L.C.   But efforts to make a firm racially inclusive should hone in on this category more than others, as this group is sending out signals that it is the most dissatisfied.


According to Law.com, “[W]omen of color experience… less satisfaction and more obstacles at large firms than their peers, including men of color.”   As per a recent survey that centered around demographics at large firms, minority women showed dissatisfaction with their jobs by such markers as being less likely to recommend their place of employment to friends who were job-hunting and feeling no sense of connection with any partners at the firms.

They also gave the firms overall low marks in all categories.

Law.com based their information on the Minority Experience Report, which culled responses in the Midlevel Associates Survey, and the Summer Associates Survey. In these reports, 6,356 midlevel associates revealed their gender and racial background, as did 6,969 summer associates.

The responses originated from firms that, for the most part, were on the Am Law 200 list of the highest-grossing firms in the nation.

In general, African-Americans and Latino respondents rated their firms lower in most categories than did white women and Asian-Americans. In an interesting side note, minority men, white men and white women all claimed to be satisfied with their work and “said that they felt they were growing professionally at their firms,” per the report.

The blog observes that young men of color are “feeling the love” as firms ramp up their efforts to diversify and as, perhaps by virtue of the changing landscape, fellow attorneys find themselves undergoing the equivalent of sensitivity training.

Minority women, however, are evidently not feeling that love—or at least are feeling less of it. “They gave firms lower marks than all other groups did in almost every category, including quality of work, interest level of work, satisfaction with work and professional growth,” noted Law.com.

Interestingly, white women—themselves a minority in some respects—gave somewhat similar answers as their women-of-color sisters in the following areas:  client contact, the importance of partnership, how much they aspired to be like the partners in their firm, whether they would recommend their firms, how they rated their firm overall and whether they would be at the firm in two years.

Overall, ‘though, minority women’s answers were seen as somewhat more negative in tone. For instance, they were harshest when rating their firms’ attempts at diversity, and they felt they had been given less responsibility than their white male counterparts.

All of this information suggests a challenging and exciting opportunity for large firms to tap into this issue—and to work with administration to develop efforts to make their minority women associates feel valued.  “[That we are not treated as well] doesn’t seem intentional,” said one minority woman respondent. ‘It is just that the partners do not feel as comfortable with associates who are not like them.”

This fourth-year associate also wrote: “In many cases [at my firm], female associates, associates of color, and gay associates are not treated as well as straight male associates.”  She further explained that her firm was probably wondering why it couldn’t “keep women and minority associates”. “Well, this is the answer.”   To read more, see:  http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=900005558326

Late-breaking news:  The drawn-out courtroom drama involving the hedge-fund titan, Raj Rajaratnam, co-founder of Galleon Group, has come to a close with a close-call conviction—at least until an appeal is filed.

Raj Rajaratnam was convicted of five conspiracy counts and nine securities fraud charges. The jury asked repeatedly to listen to several of the 45 tapes of wiretaps again, and finally reached a verdict on what the Associated Press said the prosecutors called “the largest insider trading ever involving hedge funds”.

Seven weeks of testimony sent a message from U.S. Attorney Preet Bharara that white collar laws apply to everyone, “no matter how much money you have.”

Defense attorney John Dowd said an appeal will be filed with the 2nd U.S. Circuit Court of Appeals.  There were 37 trades that the government sought to prosecute.  Only 14 made it to trial.  On that note, Dowd told reporters at Manhattan Federal Court, Wednesday, May 11. “The score is 23-14, in favor of the defense,” he said. “We’ll see you in the 2nd Circuit.”

See: http://hosted2.ap.org/APDEFAULT/3d281c11a96b4ad082fe88aa0db04305/Article_2011-05-11-Hedge%20Fund-Insider%20Trading/id-516bf46476e54d00a58a4b633e85d483

-EM

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Keeping Big Firm Associates On Board

Yesterday’s blog touched on the topic of what associates are paid in both the private and public sector, and on why they leave large law firms. Today we’ll review a few of those reasons and look at ways in which a career specialist addresses the attrition factor.

The issues revolving around Biglaw are broad, says Kate Neville in the Legal Times. Neville counsels lawyers who are considering career changes.

When an associate joins a firm, she explains, there are huge investments involved on both sides of the aisle.  It  behooves associates and firms to try to forge a better fit beforehand, and to try to make a go of it once an offer has been accepted.

There are ways, says Neville, that attorney attrition can be kept down—to keep this investment “on both sides of the table” intact.

The resolution lies in looking beyond the obvious reasons, which can be summarized as being alterations in demand and the maximizing of partner profit. There are other forces that contribute to, or drive attrition.  Included in the many factors Neville touches on are the following:

1. There is almost no investigating of employment options on the part of students.  The majority of associates become lawyers at top-tier firms after three years in school.  “For many, it is their first full-time job,” explains Neville.   They lack experience, and they really don’t know who they are yet, what they would love to excel in…or how to interact in the workplace.

2. When a match between a large firm and a student is made, it’s based on very little information.  When it comes to how their performance will be evaluated, the new associates lack know-how. They do not have a clear picture of what they can anticipate on the job.  This occurs because offers are extended “in the fall of a student’s third year of school, based primarily on interaction with the candidate as a summer associate.”

Additionally, there is pressure exerted on the student to decide.  Since third-year law students must accept or decline by November 1st, most accept their offers as a default position, stresses Neville.   “Students who are uncertain quickly discover that the large-firm market is drastically smaller in their third year and that other employers will not even post openings until the spring.”

With large debts looming for most, the thought of turning down a large firm’s offer may seem daunting.

There are steps which can be taken to lessen the toll that attrition takes on firms.

1.  First, Neville advises that law firms not always focus on hiring and grooming “keepers”.  Efforts to cultivate the best and brightest should be broadened.

2.  Don’t overlook the firm alumni network.  Your departing associates can be seen as future clients who will go on to be successful elsewhere.

3.  Create new roles for attorneys.  If you value an attorney’s skills, negotiate him or her into an expanded capacity.  For instance, says Neville, you may want to have your up-and-coming associates take on “a nonequity partnership status”. This helps the firm “retain experienced attorneys who can handle work independently.”

These same associates will monitor junior associates and generate billable hours for the firm.  They wouldn’t, however, be expected to bring in new business.   Other novel ideas for associates with worthy skills:  director of recruiting; director of professional development; director of marketing; and director of pro bono work.

For more, go to: http://www.nevillecareerconsulting.com/docs/Associates_Bail.pdf

Interested in an audio conference on this topic? See:  http://www.c4cm.com/lawfirm/AssociateCompensationModelsLawPracticeManagement.htm

Photo courtesy of Dave Pear’s blog (davepear.com)

-EM

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Challenging Biglaw: How Small Firms Attract Talent On A Tight Budget

The image of David versus Goliath is frequently evoked in legal arguments. This metaphor is used in the first line of a suit against McDonalds, in the tag line for the Institute of Justice, and in myriad legal publications, such as Jewell v. NBC and the Basics of Defamacast in Georgia. The same image that is used to describe court cases is also used to describe the firms defending them, specifically large corporate law practices. Nowadays, there’s conflict between those who see big as bad and others who view big as better.    

Such is the subject in of an article in Above The Law, featuring Steven Harper, a Kirkland & Ellis partner who teaches a Northwestern University class titled “American Lawyers—Demystifying the Profession.” In his class, as in his numerous publications, Harper analyzes attorney unhappiness and law students’ unhealthy obsession with large firms. Decidedly not Texan, both Harper and the Above The Law author seem to agree that Biglaw is the root of much associate unhappiness—high billable hours and low compensation in terms of the number of attorneys made partner.  

At the end, the article issues a challenge to small firms across the nation. It asks, “What options are there for promising graduates other than Biglaw? What advantages do you offer to talented attorneys?” A portion of the answer is listed below.  

Flexible Working Hours. Offering flexible schedules or telecommuting options is a cost-free benefit for firms and has been shown to increase productivity. With fewer associate timesheets to keep track of, small firms excel at offering unique working hours for attorneys with young families, long commutes, or simply a green state of mind (see Apple Not Green, But You Can Be). Biglaw outshines its competition in terms of mass training, office policies, standards, and consistency. One thing it finds difficult to offer, however, is an exception.  

Location. Smaller-sized firms require smaller-sized offices. This flexibility in location options often leads to lower rent and sometimes a more unique space. For example, a small firm can take advantage of the building or office for rent at the base of a ski slope or next to an urban park. It can situate itself in the center of a city, instead of the suburb. When first-years spend over 2,000 hours each year in the office, it’s not surprising that location plays an important role in their decision of choosing a law firm.  

Youth. A large firm typically indicates a long history. The experience of older attorneys is certainly valuable, but small firms have the drive and of enthusiasm of youth on its side. Younger firms are more open to risk and thus more motivated to succeed. When you know the intimate details of each employee’s family background, financial history, and future plans, winning attorneys fees in a court case suddenly becomes personal. Additionally, younger firms are more familiar with the new technology vital to the modernizing industry of litigation. For the best and brightest law firm graduates, enthusiasm, gadgets, and a general openness to fresh ideas are more attractive than grey-haired men in last-year’s suits.  

Profit-Sharing Programs. If all else fails, money talks. While larger firms are stuck fighting internal red tape, smaller firms are giving attorneys a stake in the business. Not only is this an added draw to the firm, but studies show profit-sharing programs (like the one at Google) incentivize employees to be more efficient with their time and more productive in their work. 

Training Opportunities. Finally, small firms can spend one-on-one mentorship time with every new associate. For the eager law school graduate who earned top grades, professional development, high-level responsibility, and courtroom experience during his or her first five years is a dream come true. So, when compared to the excessive doc review at Biglaw, a job with a small firm suddenly looks like the more promising career path.

The question of whether or not big is better will continue to be asked. And the answer, for each attorney, will continue to differ.

 

-WB

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